Have you heard some of these saying…”a penny saved is a penny earned”, “save your money for a rainy day” or “nothing feels better than money in the bank.” These old quotes were catchy and easy to remember but they don’t factor in current economic conditions. Inflation alone makes these statements inaccurate and worse, they create a scarcity mindset. You believe money is in short supply and you have to hold on to as much of it as you can. Let’s dig in and examine some of these statements because there are different levels of understanding when it comes to money.
If you speak to someone who has a low level of understanding about how money works, they’re more likely to take each statement at face. To them money in the bank literally means what it says. When you understand finances, you know the word bank just refers to a grouping or pool of something. That’s why you can have a river bank or snow bank. If you pool your money together and invest it into something earning you a high rate of return, you’ve just accomplished the purpose of having money in the bank.
If your saved penny just sits in an account at any bank, a penny is probably all you’re earning. You can’t afford to let your money be complacent. Lazy money doesn’t grow and can’t keep up with the rate of inflation. This results in missed opportunities for you to gain more. In fact, if your money isn’t growing it’s shrinking in value. Right now the spending power of the dollar is really about .65¢. As the Federal Reserve prints and puts more dollars into circulation its value will drop further. Your wisely invested and growing money at least has a shot at keeping up or getting ahead of it.
The worst of these sayings is save your money for a rainy day. It sounds like good advice until you understand that money over time is worth less. You can’t buy things today for the same price your grandparents paid those same items decades ago. Sure, it’s a good idea to keep something on hand for emergencies but most people don’t make that distinction. You’re better off doing something with your money that will make you more money consistently on a monthly basis. When you have that income coming in regularly—well, a rainy day just doesn’t look so scary anymore.
Understand this, the poor spend money, the middle class saves money, the rich and wealthy invest money. There’s an old saying that goes “if you love something set it free. If it was really yours, it will return to you.” I know that sounds biblical but it applies here. Let your money go into investments so it can grow and pay you dividends. You have to get out of the scarcity mindset of those earlier quotes. Cash is currency (like electricity) and it only grows when you let it flow. Let’s go.
